Temasek makes unlikely corporate governance hero

HONG KONG, May 18 (Reuters Breakingviews) - Temasek is
taking a stand – sort of – on corporate governance. The
Singaporean state investment fund abstained last week from
backing the re-election of a group of board directors at
Standard Chartered (STAN.L), according to people familiar with
the situation. The reason, StanChart suggests, is Temasek’s
preference for a more independent governance structure.

The state fund makes an unlikely corporate governance hero.
But Temasek has some grounds. StanChart’s board has recently
become less independent. Its ratio of six executives to ten
non-execs – with one extra exec added in 2012 – is higher than
that it is at cross-town rival HSBC (HSBA.L). It's legitimate to
ask if non-execs have enough clout.

One could argue that Temasek is missing a trick by not
speaking up. The fund shies away from making public statements
that might position it as an activist. But making a clear
statement on a worthy issue like board independence would win
plaudits from other shareholders, and dispel the myth that
sovereign wealth funds can’t be transparent.

Taking a clear line, though, might raise questions for
Temasek around its recent investments in Chinese banks. Take
ICBC (601398.SS), in which Temasek bought $2.3 billion of stock
in April. Typically of China’s big lenders, it has just six
independent directors on its 16-strong board. True, there is a
separate supervisory board. But with top executives hand-picked
by the government, also the bank’s biggest shareholder, there’s
little suggestion that the banks are run independently.

Temasek has clearly tilted itself towards Chinese lenders in
recent years, and has made big profits in the process. Getting
exposure to those banks’ rapid growth necessarily comes with
accepting China’s governance quirks. But there is a fine line
between being diplomatic and being inconsistent.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:

www.breakingviews.com/TOPNewsSubscription

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

CONTEXT NEWS

- Temasek, the Singaporean investment fund, abstained from
backing the re-election of several directors of Standard
Chartered at the UK lender’s annual general meeting on May 9,
according to people familiar with the situation.

- The voting was anonymous, and Temasek declined to comment.
Temasek’s stake in Standard Chartered was 18 percent as of the
end of February, Reuters data shows.

(C) Reuters 2012. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.